Elinor Performs Ten Hours of House Cleaning for Floyd in Exchange

question 11

Multiple Choice

Elinor performs ten hours of house cleaning for Floyd in exchange for a promissory note for $400. At the time that Elinor accepts the note, she is aware that bankruptcy proceedings are being filed against Floyd. Elinor can

• A) obtain HDC status.
• B) not obtain HDC status, because she knows that there are bankruptcy proceedings against Floyd.
• C) not obtain HDC status, because she did not fulfill the value requirement.
• D) not obtain HDC status, because she did not fulfill the good faith requirement.

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Definitions:

Salvage Value

The anticipated salvage value of an asset at the termination of its service life.

Annual Cash Flows

The total amount of money being transferred into and out of a business, especially affecting liquidity, within a year.

Opportunity Cost

The cost of opting for one choice over another, essentially the benefits you could have received by taking an alternative action.

Internal Rate Of Return

The internal rate of return is a financial metric used to evaluate the profitability of investments, calculating the discount rate that makes the net present value of cash flows from an investment equal to zero.